Las Vegas' Middle Class Is Shrinking

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Economic literacy has never been a defining characteristic of the Progressive Left, but the call for "Medicare for All" or "Universal Healthcare" or "Single Payer" (read: Someone Else Payer) is particularly dispositive.

Instead of debating how to expand Medicare coverage, politicians should focus on fixing the financial flaws in the existing program that threaten to bankrupt the nation.

Medicare spent 3.6% of gross domestic product in 2016, more than six times the share it consumed in 1967, the first full year it was implemented. The share of GDP consumed by Medicare will rise to at least 9% within 75 years — and that’s the good-news scenario. Other plausible forecasts show that Medicare could spend more than twice that.

A spending jump to 9% would require a roughly 17.4% increase in all federal taxes or a 30.5% cut in other entitlement and discretionary spending, or some intermediate combination. If the spending jump follows the worst forecasts, we would need to raise taxes by 36.33% or cut 91.76% of other spending. And this all assumes Congress doesn’t add even more people to Medicare than the current rules allow for.

That isn't sustainable.
That isn't practical.
That isn't workable.
That isn't affordable.

What do we need to do to fix Medicare? Focus on Three Things.

(1) Medicare’s eligibility age is much too low. The threshold has remained where it was originally set, at 65 (for most people). In 1967, the average 65-year-old American was expected to live 14.8 more years. In 2016, 65-year-olds live 19.3 more years on average—a roughly 30% jump. Yet the government has not adjusted the threshold age required for benefits.

The solution is to raise Medicare’s eligibility age incrementally. If it increases by between three and four months a year, the Medicare eligibility requirement would synchronize with the rise in Social Security’s full retirement age, so that both would hit 67 by 2027. The government could keep raising the age floor at this rate until around 2072, when the eligibility age would be 73 and the average length of coverage would return to the original duration, 14.8 years. After that point, the threshold could rise more slowly, having made up the difference that has accrued over the past 50 or so years. It would be a gradual enough adjustment to allow ample time for beneficiaries and others to adapt, but it would still help stop the program from bankrupting the nation.

(2) There has been an almost fourfold increase since 1972 in the proportion of the working-age population classified as eligible for disability under Social Security, and hence coverage under Medicare. Are four times as many people born disabled or becoming disabled at a later point in their life? No. Instead, standards for disability qualification have loosened as politicians of both parties sought to buy votes.

The solution is straightforward: restore the original disability standard — which has become lax — so that people qualify for benefits only when they are “effectively unable to work any job in the economy.” In addition, other countries have reduced disability rolls by requiring most applicants to complete a rehabilitation plan before being awarded payments. For example, The Netherlands has cut 60% of its disability numbers with this measure. These two tweaks would allow the disabled to continue receiving benefits, but people simply looking for an easy payout would no longer threaten the financial security of the elderly and truly disabled.

Adjusting the eligibility age and cutting disability rates could eliminate about 41% of the future growth in Medicare’s resource share. Much of the remaining excess could be cut by raising deductibles and coinsurance.

(3) The average beneficiary today consumes six times more medical services than in the previous generation, even without counting the drug benefit introduced in 2006 that boosted Medicare’s share of GDP by nearly 0.4 percentage point. This is because the price of medical goods and services under Medicare are priced far too low. The solution: charge more.

Most beneficiaries pay 68% less in deductibles than the previous generation and are charged coinsurance on steeply discounted rates. Since 1989, 20% of beneficiaries who are designated as low-income have been excluded from paying any deductibles, coinsurance or premiums. Adding another service costs them nothing, and as a result they consume about 42% more services than other beneficiaries, even when the total is adjusted for health status. Medicare can’t be sustained at such discounted rates.

Instead, deductibles and coinsurance should be adjusted to fit those in the private market. The current Medicare deductible for professional services is 11% of the average for commercial insurance. Deductibles need to rise to 25% of the average commercial rate over the next 20 years and then up to the full average rate over the following 10 years. Coinsurance can remain at the below-market rate of 20% for 30 years. After that, unless other cost-cutting measures are taken, saving Medicare will also require low-income beneficiaries to bear some cost increases. By 2091, deductibles for most beneficiaries would need to hit $7,500 and their coinsurance would have to rise to the current market rate of 36%.

If the U.S. is lucky and Medicare follows the most optimistic forecasts, these increases, along with the first two changes, should keep Medicare’s GDP share constant. If costs follow pessimistic predictions, these increases would need to be approximately double.

More-extensive redesigns may be preferable to these three fixes, but one way or another costs have to stop consuming ever larger shares of GDP, or else the program is liable to explode—and take the rest of the economy with it. Talking about a grand expansion scheme like Medicare for All is pure fantasy.

In all that you fail to deal with the most interesting fact set.

As a share of Gross Domestic Product we spend around twice the OECD average. But in return our life expectancy falls two years below the OECD average. There are of course specific areas where we do well. But the overall statistics are certain not twice as good as the OECD average.

So we have powerful evidence that we do not do health care very well and that better systems exist.

And the solution used by a number of the successful nation is very similar to Medicare for all.

So perhaps we should be off developing a system similar to that of the more successful nations.

Personally I would have little fondness for Medicare. The first time in my life I ever actually paid for medical care was when I went on to Medicare. Now we pay over a grand a month for what had always been paid by present or former employer.

Life expectancy has more to do with diet and lifestyle than medical treatment. Americans eat huge portions of fatty food. It's not a sign of poor healthcare that we're 2 years shy of the average. It's goddamn impressive that we're that close.

Another big contributor to our healthcare problem is too many people make bad financial choices so they don't have healthcare so they put everything off and only go when it's an emergency when it needs more extensive and expensive treatment.

Punishing all of us with more taxes to cover these poor planners is wrong in every way.

Life expectancy has more to do with diet and lifestyle than medical treatment. Americans eat huge portions of fatty food. It's not a sign of poor healthcare that we're 2 years shy of the average. It's goddamn impressive that we're that close.

Another big contributor to our healthcare problem is too many people make bad financial choices so they don't have healthcare so they put everything off and only go when it's an emergency when it needs more extensive and expensive treatment.

Punishing all of us with more taxes to cover these poor planners is wrong in every way.

There are of course other factors but there is little to suggest the population is worse than that of many of the other OECD countries. And that argument is generally raised by those who wish to oppose the obvious. Lacking any real rationale they try to claim other factors are causal. And there are likely some that do have impact. We might try and use some of the savings from adopting a sound medical plan to fix some of those things.

Actually if we follow the lead of the better nations we could effectively lower our cost and use the savings at least partially to offer a tax reduction.

As a share of Gross Domestic Product we spend around twice the OECD average. But in return our life expectancy falls two years below the OECD average. There are of course specific areas where we do well. But the overall statistics are certain not twice as good as the OECD average.

So we have powerful evidence that we do not do health care very well and that better systems exist.

I agree - our system is very broken. Most people think our system is very broken. I'm not sure how to fix it.

I think a big chunk of the costs in our system - a major portion of the reason we spend around twice the OECD average - is administrative bloat. And like it or not, we must realize that administrative bloat walks on two legs, provides roof over the heads of their own families and puts food on their tables. To destroy administrative bloat means a lot of people - and I mean a lot of people - must lose their jobs. Not doctors or nurses or others involved with actual care of patients - but others who are part of the system.

But as I said before, I don't know how to fix it. It will take someone a lot smarter than me.

I agree - our system is very broken. Most people think our system is very broken. I'm not sure how to fix it.

I think a big chunk of the costs in our system - a major portion of the reason we spend around twice the OECD average - is administrative bloat. And like it or not, we must realize that administrative bloat walks on two legs, provides roof over the heads of their own families and puts food on their tables. To destroy administrative bloat means a lot of people - and I mean a lot of people - must lose their jobs. Not doctors or nurses or others involved with actual care of patients - but others who are part of the system.

But as I said before, I don't know how to fix it. It will take someone a lot smarter than me.

There clearly is overhead though I think it is only a portion of the problem. We need a system that is much more effective. But it would appear that the employment lost may well be made up by an increase in medical practitioners. I would like to see a lot more physician amplifiers..trained somewhere between an RN and an MD. Maybe with an eventual transition upward to an MD after some years as an understudy. Maybe fleets of them doing the front end work and saving the doctors for the real problems.

Maybe a good look at the whole system and where the money actually goes. Are physicians over paid? Do hospitals charge too much?

My niece, an English MD just jumped to Copenhagen and a Phd and practice there. She did not care for the English system nor the American one. She is also a US citizen and could have come here but it would have taken a lot of work to deal with the credentialing system

And if you want to reduce government, you can start by slashing the military budget. I think the last figure I saw was 780 BILLION/year. But I haven't heard any tea partiers dismantling the military industrial complex. Nope, it's only accelerated in it's spending of useless gewgaws like the F-35 program.

No, not even close. Even in Las Vegas, that would be upper middle class at best. Elite is a very small group of people that are extremely wealthy. They live in huge mansions, have private jets and limos. Well known examples of the elite would be Warren Buffet, Jeff Bezos or Bill Gates. CEO's of large companies, movie stars, singers, high level investors, etc are other examples of the elite. 250k/year would be considered dirt poor by the elite. It is all relative.

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